Wednesday, December 28, 2005

Neal McCluskey relies on a very selective reading of the statistics to determine that students are living "higher on the hog." For example, he says that aid dollars are increasing: "Between 1994–95 and 2004–05, total inflation-adjusted student aid provided through state and federal grants and subsidized loans ballooned from $37 billion to almost $69 billion." Well, to most students, especially poor and minority students, loans don't really function as aid, because they have to be paid back, with interest.And the proportion of grants to loans has reversed since the 1980s, to 58% loans and 41% grants.

He also pulls out the old saw that a BA provides a lifetime "million-dollar payoff"--"That means after factoring in loan debt, the average bachelor's degree holder will turn a huge $982,400 profit on college!" To me, this "point" betrays such a narrow view of the purpose of higher education. I'll borrow the words of Bob Shireman here: Yes, it is true that a college graduate, on average, earns close to a million dollars more over a lifetime than a high school graduate. But there are two trick words in that sentence. First, you have to graduate from college, a feat that barely half of those who start college currently achieve within six years. Second, the high economic returns to education are an average. Actual salaries of college graduates vary enormously because of career and life choices, skills, geography, fluctuations in the economy, and plain old luck.

A college education is not an expensive painting that you buy to turn a profit on. It's an investment in America's future growth--each person with a BA contributes more in taxes and in productivity than a person without one. To cut off access at the start by forcing students to borrow their way through is an extremely short-sighted use of funds.

From "Inside Higher Ed":Professors who specialize in language can probably draw from a vast reservoir of choice words to describe the current fiscal climate of academe. And based on one small sample, few of those words are good.

For Jeffrey J. Williams, an English professor at Carnegie Mellon University, the word is “debt.” Williams was one of the professors who shared his choice at a session called “Academic Labor: Keywords for Current Conditions” at the Modern Language Association’s annual convention in Washington Tuesday.

Professors who went through college in the 1970s and 1980s may not have dealt with student debt, Williams said, but they’d better start talking about it now. “Sex is not the great forbidden,” he said. “People talk about it all the time. Money is the great forbidden.”

Thursday, December 22, 2005

In a quaint phrase, the Social Security Administration has long described the current retirement system in America as a three-legged stool. One pictures Grandma sitting on that stool, perhaps next to the coal stove, working on some mending.

Mr. Smith, 35, is working on "Clerks 2: The Passion of the Clerks," tentatively scheduled for release in the spring. "All I can say about 'Clerks 2' is that it deals with what happens to this angry young man when he becomes 35 and is no longer relevant to society since he's not in the age group targeted by corporations anymore."

That message, Mr. Smith said, will resonate with his most dedicated audiences. "My Web sites tell me my fan base is overeducated, underemployed slacker college kids like my two 'Clerks' characters and generally myself," he said.

I bet you students didn't realize you were the single most financially healthy sector of society, most able to bear the sacrifice for everybody. Not CEOs. Not the banking industry. Not millionaire retirees. Twenty year olds who live off student loans and low-wage jobs while trying to finish a bachelor's degree at a public university.

Wednesday, December 21, 2005

This morning, the Senate voted 51 to 50, with Vice-President Cheney casting a tie-breaking vote, to cut $12.7 billion out of the student loan programs.Rather than cutting lender subsidies, the bill takes approximately 70% of its savings from higher loan interest rates for borrowers and redirecting excessive student and parent payments to private lenders.These cuts are not only the largest in the history of the student loan program, but also the largest single cut in the budget reconciliation package.This budget bill will make student and families pay more for their loans so that Congress can direct new tax cuts to some of the wealthiest Americans.

BUT:

Before the vote, Senator Conrad used a procedural maneuver to strip two non-germane provisions out of the bill. As a result the newly amended reconciliation bill must return to the House to be approved. Members of the House will now be able to reconsider their votes from early Monday morning, made mere hours after the final bill was introduced. In the coming weeks, students will continue to make the case to Congress that they should stop this raid on student aid.

Here's my second review, from Publishers Weekly: Generation Debt: Why Now Is a Terrible Time to Be Young Anya Kamenetz. Riverhead, $23.95 (304p) ISBN 1-59448-907-6

Surveying the economic realities facing today's 20- and 30-somethings, 24-four-old Kamenetz decides, "It's not too dramatic to say that the nation is abandoning its children." Thanks to skyrocketing tuition and changes in federal funding, college students are graduating with an average of almost $20,000 in loans at the same time that jobs have become scarcer, real wages have dropped and the cost of health care has soared. Is it any wonder that kids are boomeranging home and racking up credit card debt? Kamenetz, who first wrote about these issues for the Village Voice, intertwines an analytical overview of the new economic obstacles with interviews of the financially strapped and descriptions of her own experience struggling to make ends meet as a freelance journalist. Her book is livelier than Tamara Draut's similarly themed Strapped, but lighter in its analysis of law and policy. Most interestingly, Kamenetz documents how our perception of the crisis is shaped by self-centered boomers who have lost touch with their children's plight. More of a white paper than a guidebook, this volume doesn't offer under-40s much personal financial advice (that job is taken up by Gener@tion Debt, see review below). It does, however, make clear how imperative it is that we find solutions to these problems as quickly as possible. (Feb.)

My latest Gen Debt column is up and in the Voice today. It's a profile from my time in New Orleans about a guy who took a job with Teach for America and ended up working as a contractor for the Federal Emergency Management Agency.

Look out for my next column which will contain some surprising info about the relationship between Sallie Mae and Congress.

Sunday, December 18, 2005

The House and Senate budget conferees returned a bill with a net cut of $12.7 billion to the student loan programs.Rather than cutting lender subsidies, the bill derives approximately 70% of its savings from higher loan interest rates for borrowers and redirecting excessive student and parent payments to private lenders.While Congress directs several billion dollars to pay for grant aid and some student borrower benefits, the bulk of the cuts will be sent out of the program to pay for tax cuts for the wealthiest Americans.

Over the next five years the bill raises $14.9 billion from excessive student and parent interest payments and higher interest rates on parent loans. This figure includes about $13 billion in excessive payments made by student and parent borrowers. Under current law, when borrowers pay more than a fair market rate on their college loans, lending institutions are allowed to keep this windfall, even though it represents excessive payments made by student and parent borrowers. Rather than return these excessive interest payments to student and parent borrowers, this budget bill simply shifts them to pay for additional tax breaks for the wealthy.

Wednesday, December 14, 2005

Sallie's dividend has risen at an average annual clip of 18 percent over the past ten years. And thanks to hefty helpings of stock options, Sallie's top executives have earned fortunes. From 1999 to 2004, just-retired CEO Al Lord -- now the lead investor in a group trying to purchase the Washington Nationals -- received total compensation of $225 million. New CEO Thomas "Tim" Fitzpatrick made $145 million over the same period.

To produce those sorts of numbers, a company usually has to be obsessed with the bottom line, and Sallie is certainly that (a big chunk of its executives' bonuses is based on Sallie's profits). As good as that may be for shareholders, a growing number of critics contend that those profits are coming at the expense of Sallie's other constituents: students and taxpayers.

"Sallie advocates policies we believe are frequently contrary to the interest of students," says Luke Swarthout, a higher-education advisor to the U.S. Public Interest Research Groups. He charges that Sallie used its political clout to shape new legislation that will increase the cost of student loans.

That classic capitalist dilemma: this is immoral, but really, really profitable!

Tuesday, December 13, 2005

I hear that Kirkus (one of the trades that publishes pre-publication reviews) is tough, and this review is good to mixed. :

Kamenetz focuses her first book on the increasing economic difficulties of today's American youth. Her primary aim here is to figure out exactly how the baby boomers financiallyscrewed generations X and Y and to describe how the victims are trying to dig themselves out of the holes they're in. She devotes the bulk of her readable though scattershot text to examples of young people trying to get by in an America of diminished employment prospects and little financial security.She identifies many contributing factors: the gargantuan loans necessary for all but the very rich to get a college degree, which often doesn't pay for itself in post-graduation income; the shrinking federal safety net; rampant consumerism fueled by too-easily accessible credit cards with ruinous interest rates. This is worthwhile material, and many readers will feel embarrassed complaining about their own lives after plowing through tales of grinding borderline poverty, but Kamenetz doesn't satisfactorily string it all together...Kamenetz is at least able to make the strong point that the young can't look to people in powerfor help: "It is time for all of us to start living for the future."

Do I think the Times is wrong? Not exactly. It's absolutely true, as the Editorial Board wrote, that if this city doesn't get the federal help it needs, and soon, the recovery will be crippled. It's true, as they say, that stalling out on this aid, needed for the levees and the rebuilding, in Washington is a great wrong and a great shame and shows our nation's weakness-"a feeble giant indeed." It is a weakness most of all, as they say, that we appear, as a nation, to accept our leader's violation of promises made a mere three months ago. It's true, as they do not say, that the city's black diaspora is having the most trouble returning, and that what is really at stake is the death of a major black American city.

But they are wrong to suggest that it is within the realm of possibility to abandon this city. They don't understand how much of its spirit has already revived, that this absolutely devastated place already has 10 times the charm of your Houston, your Detroit, your Scottsdale, and even more so because it feels like a small town for the moment. They haven't driven the miles of abandoned streets in Mid-City only to come upon a FEMA travel trailer wrapped in white Christmas lights. They haven't heard the indignant tone of a woman with 13 grandchildren evacuated to Texas when she says, "Of course we want to come home. This is home."

Monday, December 12, 2005

I had an Op-Ed column in THE NEW YORK TIMES today.I'd be lying if I tried to play it cool and say I wasn't very, very excited about this opportunity. Let me know what you think, i've gotten a dozen emails already.

Op-Ed ContributorRobbing Joe College to Pay Sallie Mae

THE higher education financing system in this country, like the health care system, is broken. In both cases, costs spiral out of control while millions of people, especially the poor, are not served. And in both cases, a few corporations are making hefty profits.

From the 1950's to the 1970's, college attendance grew along with federal student grant aid. Then, as tuition mushroomed and loans replaced grants, educational attainment stagnated. Today, those lucky enough to graduate from college end up with an average of $17,600 in loans, a burden that shapes decisions like buying a house or having children. But most young people are not so lucky - half of those who start college do not graduate at all, in part because of the financial burden of staying in school. As a result, Americans aged 25 to 34 are less educated than 45- to 54-year-olds - and more to the point, less educated on average than the citizens of several other industrialized nations.

The federal student aid system fails students, but it does a great job of delivering profits to private lenders, which issued $65 billion in loans last year. When it created the loan program, Congress assumed that banks would not lend to young people without extensive guarantees and incentives. So they guaranteed a certain rate of return on student loans, made up their losses on defaulters, created a secondary market for student loans by chartering the Student Loan Marketing Corporation (Sallie Mae) and allowed state lending authorities to issue tax-exempt bonds to raise loan capital. Student lending has grown into a highly profitable and low-default market, yet these special privileges persist.

Sallie Mae, the private company that makes, buys and sells the most student loans, boasted the second-highest return on revenue in the 2005 Fortune 500. Sallie Mae also happens to be the largest contributor, by far, to members of the House Education Committee. The Chronicle of Higher Education found that the committee chairman alone, John Boehner of Ohio, received $172,000 from student lenders and loan consolidators in 2003 and 2004.

It's thus no surprise that lawmakers are apt to protect lenders and not students. On Oct. 26, Mr. Boehner's committee approved more than $14 billion in cuts over the next six years, which would be the largest reduction in the history of the federal student aid program. Mr. Boehner defended the cuts by saying they mostly came from corporate subsidies to Sallie Mae, Bank One, Citibank and the rest. But that gets to the heart of what is wrong with this program - and the way to fix it. The best way to reverse the shocking trends in debt and educational attainment would be to switch from loans back to grants. Given ballooning deficits, though, that's a nonstarter. Instead, why not cut off subsidies to banks and give that money to needy students?

One way to do that is to expand a program begun in 1992 in which the government makes loans directly. A recent Government Accountability Office report showed that direct loans cost the government one-fifth as much as subsidized loans over the past 10 years. Mr. Boehner, however, kept the report under wraps for 30 days, and it was released just hours before the House committee vote. Representative George Miller, Democrat of California, estimates that the aid program could save $60 billion over the next decade by switching entirely to direct loans - enough for almost a 50 percent increase in Pell Grant money.

A group of students has also proposed a National Tuition Endowment, which would preserve an estimated $30 billion for need-based grants by cutting loan subsidies and finally closing an infamous loophole that has lenders collecting 9.5 percent interest from the government on certain loans.

Yet Mr. Boehner is heading in a different direction. He told an audience of commercial student lenders earlier this month that "I've got enough rabbits up my sleeve" to make them happier with the bill.

With the higher education budget scheduled for passage next year, this is a great occasion for a public debate on the values that conservatives claim, like individual self-determination, free markets and international competitiveness. Do we want to keep robbing from our future?

Sunday, December 11, 2005

The New York Times has run 2 good editorials about the fate of New Orleans, where I went to high school and where I have been for the past 4 weeks. Both of them say the right things, but with a ring of defeatism and fatalism that I find extremely hard to accept. I write this post from a cafe packed with (local) customers on a beautiful December day. A core of this city has already come alive, and I believe it MUST be saved.Editorial today:We are about to lose New Orleans. Whether it is a conscious plan to let the city rot until no one is willing to move back or honest paralysis over difficult questions, the moment is upon us when a major American city will die, leaving nothing but a few shells for tourists to visit like a museum.

The rumbling from Washington that the proposed cost of better levees is too much has grown louder. Pretending we are going to do the necessary work eventually, while stalling until the next hurricane season is upon us, is dishonest and cowardly. Unless some clear, quick commitments are made, the displaced will have no choice but to sink roots in the alien communities where they landed.

The price tag for protection against a Category 5 hurricane, which would involve not just stronger and higher levees but also new drainage canals and environmental restoration, would very likely run to well over $32 billion. That is a lot of money. But that starting point represents just 1.2 percent of this year's estimated $2.6 trillion in federal spending, which actually overstates the case, since the cost would be spread over many years. And it is barely one-third the cost of the $95 billion in tax cuts passed just last week by the House of Representatives.

Total allocations for the wars in Iraq and Afghanistan and the war on terror have topped $300 billion. All that money has been appropriated as the cost of protecting the nation from terrorist attacks. But what was the worst possible case we fought to prevent?

Now we're losing another window of opportunity for reconstruction. But this time it's at home.

Two weeks after Hurricane Katrina, Mr. Bush made an elaborately staged appearance in New Orleans, where he promised big things. "The work that has begun in the Gulf Coast region," he said, "will be one of the largest reconstruction efforts the world has ever seen."

Such an effort would be the right thing to do. We can argue about details - about which levees should be restored and how strong to make them - but it's clearly in the nation's interests as well as local residents' to rebuild much of the regional economy. the private sector can't rebuild the region on its own. The reason goes beyond the need for flood protection and basic infrastructure, which only the government can provide. Rebuilding is also blocked by a vicious circle of uncertainty. Business owners are reluctant to return to the gulf region because they aren't sure whether their customers and workers will return, too. And families are reluctant to return because they aren't sure whether businesses will be there to provide jobs and basic amenities.

A credible reconstruction plan could turn that vicious circle into a virtuous circle, in which everyone expects a regional recovery and, by acting on that expectation, helps that recovery come to pass. But as the months go by with no plan and no money, businesses and families will make permanent decisions to relocate elsewhere, and the loss of faith in a gulf region recovery will become a self-fulfilling prophecy.

It's all about "young adults - members of generations known as X and Y - wondering what will be left for them, especially as the cost of living rises, national debt increases, and as the huge population of aging boomers begins to devour Social Security and company pensions." ... and student loan debt, credit card debt, temp/low-wage/low benefit jobs...

"Young adults also are ready to wrestle away their piece of the pie from boomer politicians, from "helicopter parents" who hover over their adult kids, and even from aging rockers who have yet to give up the stage.

The question is: will boomers let them - and recognize they can't rule forever?"

New York Times:Under the new [bankruptcy] law, which the banking industry spent more than $100 million lobbying for, [the newly bankrupt] may be even more attractive [to credit card companies] because it makes it harder for them to escape new credit card debt and extends to eight years from six the time before which they could liquidate their debts through bankruptcy again....

...Consumer groups say the new law has put millions of Americans at risk of being in a continuous debt loop through their credit cards.

Women in their 20s gain 10 percent in lifetime earnings for every year they wait to have a child. A woman who has her first child at 25 earns 10 percent less over her entire life than a woman who waits until 26. If you have a child before 30, it will reduce your earnings on average for the rest of your life. (The wage hit is smaller in your 30s). I read this entire article out loud to my fiance.

Friday, December 09, 2005

"Major social changes start with a shift in philosophy, and then a new generation is born with that at their core," said Josh Tulkin, 24, who works for a group focused on climate issues in the region outside Washington, D.C., and also for a network of youth organizations called SustainUs. "That generation is us."

Some wore T-shirts emblazoned with a message aimed at delegates: "Stop asking how much it will cost you and start asking how much it will cost us."

Tuesday, December 06, 2005

Decrying a refusal by banks implicated in the US slave trade to pay reparations to the descendents of enslaved blacks, a collection of religious, community, student and political groups yesterday called for a boycott of student loans backed by finance companies with historical ties to slavery.

Complicated. I was on a panel about slavery reparations this fall at Medgar Evars College. The African-American individuals in attendance expressed the view that reparations are an explosive issue representing their hope for an end to their continuing economic and social disadvantages and a powerful and successful future for their community--perhaps even a revolutionary ideal. This was totally news to me because for the white people I know, the issue of reparations is a nonissue--considered only in the abstract, easily dismissed. A serious disconnect, to say the least.

Today the Supreme Court heard the question of whether the federal government can withold student aid from universities that even symbolically restrict access to military recruitment, on anti-discrimination grounds (because the military, unlike other employers that must abide by equal-opportunity laws, openly bans gays and lesbians. )

I'm disturbed by the way the state's lawyers equate the federal government with the military. The military is set apart when it suits their purposes--we are asked to support the troops even when we oppose the war, and quite rightly. The very existence of the ban on gays supports the idea that the military is a separate estate. By the same token, I believe that the operation of the federal student aid program ought to be kept separate from the desire of the military for new recruits.

"At the end of the day, I believe you'll be at least satisfied, or even perhaps happy," with the new higher education appropriations bill, Representative John Boehner, chairman of the House Committee on Education and the Workforce, told an appreciative audience on Monday. "Know that I have all of you in my two trusted hands."Was he speaking to students? Of course not. It was an audience of student lenders unhappy with the proposed cuts in their federal subsidies. Cuts to higher ed are now up to $20 billion in the Senate bill.According to the Chronicle of Higher ed (sub. req.):"In his speech to the bankers, Mr. Boehner said he would push to roll back some of the proposed cuts. He wasn't specific but said, "I've got enough rabbits up my sleeve" to produce a bill that would not be harmful to lenders."

The one thing I would like to convey that I think is not coming across in the news is just how hard folks are working to get the city back up and running, whether it's individuals, local businesses, or community institutions like the zoo, parks and museums. The city has never been so small, personal and friendly. If the recovery stalls out, it will absolutely be a failure of our government to get us the aid we need, not of the initiative and spirit of this place.